Solutions for biomass fuel market barriers and raw material availability - IEE/07/777/SI2.499477

Biomass trade – D2.6.3 and Forest industry and bioenergy – D7.3.2 EUBIONET III workshops in Espoo, Finland on 14-15, 2011 Minutes written by Edita Vagonyte, AEBIOM

Brussels, May, 2011

Content

1 Preface....................................................................................... 3 2 Participants list .......................................................................... 4 3 Workshop programme day 1 ...................................................... 6 4 Biomass trade – focus on solid biofuels ..................................... 7 4.1 Biomass trade in Baltic sea region – Chair Juha Poikola, PVO........ 7 4.2 Price indexes and trade flows – Chair Eija Alakangas, EUBIONET III, VTT ........................................................................................... 8 4.3 Standards – Chair Martin Junginger, IEA Bioenergy Task 40 ......... 9 4.4 Sustainability of solid biomass – Chair Jean-Marc Jossart, AEBIOM ...............................................................................................11 5 Workshop Programme Day 2.................................................... 13 6 Bioenergy and forest industry .................................................. 14 6.1 Biomass availability for energy and raw material – Chair Timo Heikka, StoraEnso ......................................................................14 6.2 Biomass and bioenergy solutions for forest industry - Chair Stefan Sundman, Finnish Forest Industries Federation ...............................16 6.3 Pellets and torrefied biomass – Chair Eija Alakangas, VTT/EUBIONET III ......................................................................18 6.4 Future options for bioenergy in forest industry ..........................19 7 Appendix 1: Summary of the feedback of the event ................. 20

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1 Preface This publication is part of the EUBIONET III Project (Solutions for biomass fuel market barriers and raw material availability - IEE/07/777/SI2.499477, www.eubionet.net) funded by the European Union’s Intelligent Energy Programme. EUBIONETII is coordinated by VTT and other partners are Danish Technological Institute, DTI (Denmark), Energy Centre Bratislava, ECB (Slovakia), Ekodoma (Latvia), Fachagentur Nachwachsende Rohstoffe e.V., FNR (Germany), Swedish University of Agricultural Sciences, SLU (Sweden), Brno University of Technology,UPEI VUT (Czech), Norwegian University of Life Sciences, UMB (Norway), Centre wallon de Recherches agronomiques, CRA-W (Belgium), BLT-HBLuFA Francisco Josephinum, FJ-BLT (Austria), European Biomass Association, AEBIOM (Belgium), Centre for Renewable Energy Sources, CRES (Greece), Utrecht University, UU (Netherlands), University of Florence, UNIFI (Italy), Lithuanian Energy Institute, LEI (Lithuania), Imperial College of Science, Imperial (UK), Centro da Biomassa para a Energia, CBE (Portugal), Energy Restructuring Agency, ApE (Slovenia), Andalusian Energy Agency, AAE (Spain). EUBIONET III project will run 2008 – 2011. The main objective of the project is to increase the use of biomass based fuels in the EU by finding ways to overcome the market barriers. The purpose is to promote international trade of biomass fuels to help demand and supply meet each other, while at the same time the availability of industrial raw material is to be secured at reasonable price. The EUBIONET III project will in the long run boost sustainable, transparent international biomass fuel trade, secure the most cost efficient and value-adding use of biomass for energy and industry, boost the investments on best practice technologies and new services on biomass heat sector and enhance sustainable and fair international trade of biomass fuels. EUBIONET III project partners have organized two successful workshops on biomass trade and bioenergy and forest industry on 14 and 15 April in VTT offices, Vuorimiehentie 5, Espoo, Finland. The workshop on Bioenergy and Forest industry was organised in cooperation with Finnish Forest Industry Federation. This paper includes the programmes of the workshops, participants list and the minutes.

Edita Vagonyte, AEBIOM, Brussels, May, 2011

The sole responsibility for the content of this publication lies with authors. It does not necessarily reflect the opinion of the European Communities. The European Commission is not responsible for any use that may be made of the information contained therein.

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2 Participants list EUBIONET III workshops on 14 -15 April 2011, Espoo, Finland First name

Last name

Company/Organisation

E-mail

Aimo

Aalto

Ministry of Employment and the Economy

[email protected]

Eija

Alakangas

VTT

[email protected]

Antti

Asikainen

Finnish Forest Research Institute

[email protected]

Heidi Peter

Bergman Björklund

Vision Hunters Metso Power AB

[email protected] [email protected]

Tage

Fredriksson

Finnish Wood Energy Association

[email protected]

Yuri

Gerasimov

Finnish Forest Research Institute

[email protected]

Jussi Timo James Jørgen Seppo Jorma Jean-Marc Martin Juha-Pekka Virpi Marjo Pekka

Hautamäki Heikka Hewitt Hinge Huurinainen Isotalo Jossart Junginger Juuti Karttunen Kauppi Kauppi

Hyötypaperi Oy StoraEnso Independent consultant Danish Technical Institute MHG Systems Oy Ltd Pohjolan Voima Oy AEBIOM Utrecht University Nonagon Oy Labtium Oy VTT University of Helsinki

[email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

Leena

Kerkelä

Pellervo Economic Research PTT

[email protected]

Jaap Marica Matti

Kiel Kilponen Kuusisto

ECN John Deere Forestry Tornator Oy

[email protected] [email protected] [email protected]

Petteri

Kuuva

Ministry of Employment and the Economy

[email protected]

Sampsa Ulrich Sakari Jussi Jaakko Pertti Udo Matti Petteri

Laakso Leberle Lehtinen Lehtosalo Lehtovaara Leppäluoto Mantau Mikkola Nuolivirta

SciTech-Service Oy CEPI HY agroteknologia Versowood Vapo Oy Höyry ja Lämpö Oy University of Hamburg StoraEnso Indufor Oy

[email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

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First name

Last name

Company/Organisation

E-mail

Didzis

Palejs

Latvian biomass asociation "LATbio"

[email protected]

Luc Juha

Pelkmans Poikola

VITO PVO

[email protected] [email protected]

Olga

Rakitova

The Bioenergy International.Russia

[email protected]

Tapio

Ranta

Lappeenranta University of Technology

[email protected]

Josef Risto Martti Matti Kai Arja

Rathbauer Ryymin Savolainen Sihvonen Sipilä Soini

FJ-BLT Jyväskylän Energia Oy Vapo Oy FOEX Indexes Ltd. VTT Hyötypaperi Oy

[email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

Birger

Solberg

Norwegian University of Life Sciences

[email protected]

Antti

Suhonen

BioCan Oy

[email protected]

Stefan

Sundman

Finnish Forest Industries Federation

[email protected]

Kaisa Edita

Tarna-Mani Vagonyte

Stora Enso AEBIOM

[email protected] [email protected]

Jouni

Valtanen

Finnish Forest Industries Federation

[email protected]

Petri Björn Carl Johan

Vasara Vikinge Wilén Vinterbäck

Pöyry Ekman & Co AB VTT SLU

[email protected] [email protected] [email protected] [email protected]

Iveta

Zelca

Latvian biomass association LATBIO

[email protected]

Dmitry

Zubkov

The trade representation

[email protected]

Olli

Äijälä

Forestry Development Centre Tapio

[email protected]

Seppo Tuomi TTS [email protected] Participants of EUBIONET III workshop 14 -15 April 2011 from VTT offices in Jyväskylä, Finland (videoconference) David Saana Pirkko Hannu

Agar Kataja-aho Vesterinen Lamberg

University of Jyväskylä University of Jyväskylä VTT Elomatic

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[email protected] [email protected] [email protected] [email protected]

3 Workshop programme for Biomass trade – focus on solid biofuels Thursday, 14 April 2011, VTT, Vuorimiehentie 5, Espoo, Finland Biomass trade in Baltic sea region – Chair Juha Poikola, PVO Bioenergy in Finnish energy system, Petteri Kuuva, Ministry of Employment and the Economy, Finland Trading of wood chips in the Baltic Sea Region, Björn Vikinge, Ekman & Co. AB, Sweden Energy wood resources and trade of wood chips from Russia, Yuri Gerasimov, Finnish Forest Research Institute Price indexes and trade flows – Chair Eija Alakangas, EUBIONET III, VTT EUBIONET III results of price collection and price mechanisms, Johan Vinterbäck, SLU, Sweden Price indexes for industrial wood pellets and wood chips, Matti Sihvonen, Foex Indexes International trade of wood pellets – prices, trade flows and future trends, Martin Junginger, Utrecht University, the Netherlands Wood pellet production and markets in Baltic sea region, Martti Savolainen, Vapo Oy Standards – Martin Junginger, IEA Bioenergy Task 40 EUBIONET III survey for industrial wood pellets standard, Eija Alakangas, VTT, coordinator of EUBIONET III project Fuel specifications of industrial wood pellets, Yves Ryckmans, Laborelec, presented by Jean-Marc Jossart, AEBIOM/European Pellet Council ENplus wood pellet certification, Jean-Marc Jossart, AEBIOM Sustainability of solid biomass – Jean-Marc Jossart, AEBIOM Sustainability issues for solid and gaseous biomass, Luc Pelkmans, VITO, Belgium Dimensions of sustainability in forest biomass supply, Antti Asikainen, Finnish Forest Research Institute, Finland Summary of EUBIONET III case studies and manufacturers of biomass heating and cooling – fuel switch from fossil to biomass, Josef Rathbauer, FJ-BLT, Austria Summary of the workshop – Jean-Marc Jossart, AEBIOM Presentations are available on EUBIONET III website at www.eubionet.

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4 Biomass trade – focus on solid biofuels

4.1 Biomass trade in Baltic Sea Region – Chair Juha Poikola, PVO Mr Petteri Kuuva from the Finish Ministry of Employment and the Economy has explained the particularities of the Finish national renewable energy action plan. At present, Finland, with more than 400 medium and large scale power and heating plants, is the 3rd largest country in RES use in the EU. Finland is also one of the leaders in utilization of wood based fuels – almost 80% of RES in Finland is coming from wood based material with a large usage of residues from the forest industries. It results in direct employment of 26 000 people. Finland has to reach 38% RES share within their final energy consumption by 2020. This means that present RES use of 87 TWh (in 2009) has to reach the consumption of 124 TWh by 2020. Finland has found smart ways of increasing their bioenergy/RES share. It will be done by introducing a subsidy package (which took effect on 25 March 2011) made of three components to promote wood energy:  Production subsidy dependent on EU-ETS allowance price for electricity from forest chips – it means that when CO2 price is below or equals 10 euros/ton, the subsidy given will be 18 €/MWhe; the subsidy would decrease linearly to 0 euros/ton when CO2 price reaches 23 euros/ton. Subsidy for forest chips for heat is set to 21 €/MWh.  Feed-in tariff for small CHP plants using wood energy with heat premium of 20 €/MWhe  Energy subsidy for small diameter wood from young forests (still to be approved the 10 euros/m3 proposal to subsidize maximum 45 m3/ha).

The next speech “Trading of wood chips in the Baltic Sea Region” presented by Björn Vikinge from Ekman & Co. AB, Sweden focused on the trade issues in Baltic sea region where the most flows go from east to west and from south to north with a common vessel size of 300 – 10 000 tons. Regarding Russia, the export has reduced since Russia has introduced an export tariff of 5 EUR/m3 of solid biomass in July 2007 and 15 euros/m3 in April 2008. Apparently, Latvia has a highest potential to export their biomass whereas Estonia and Lithuania uses its’ own biomass sources extensively. The prices of pellets depend on quality. The speaker also highlighted Vygborska plant - one of the largest plants in the world but in a risky environment such as Russia. According to Yuri Gerasimov from Finnish Forest Research Institute focussed on trading, Russia has also set its’ own target for RES: from less than the current 1% in electricity generation to 2.5% in 2015, and 4.5 % by 2020. However, with 100 million solid m3 wood 7

resource potential, Russia is largely underexploited from bioenergy perspective. Nevertheless, pellets production in Russia increases, mainly for export purposes.

4.2 Price indexes and trade flows – Chair Eija Alakangas, EUBIONET III, VTT This session focussed on biomass prices with Mr Johan Vinterback presenting the results of two surveys on biomass price collection and price mechanisms carried out by EUBIONET III project. Due to a fast growth of the bioenergy market and increasing biomass trading volumes, it is becoming vital to understand the functioning of the wood energy markets as well as price developments. Mr Vinterback explained that biomass fuels prices largely depend on long term policy mechanisms, energy prices, development of the production costs, which depend on the availability of new raw material and transport cost. Another driver or a barrier can be other forest industries. In some cases, the forest industries become suppliers of raw material for bioenergy and in some others competitors for the same material. The speaker explained where it is possible to find biomass price statistics in most of EU countries. Mr Vinterback informed that wood fuels statistics at EU level can be found within Eurostat, Pellets@tlas project and within the commercial wood fuel price statistics such as Argus, Endex, Foex. Mr Vinterback showed that biomass fuel prices vary greatly in EU countries and do not depend on each other. In an integrated trade market, certain happenings in one place and a consequent price change has an impact on the price in other countries’ market, i.e. like in oil market. This means that biomass markets are not integrated and prices vary independently with an exception of pellets market in Germany. However, an increasing market trade will change this interdependency. An increasing market trade will also mean that an increasing attention will be given to freight cost, exchange rate fluctuations and other costs related to intercultural trade such as business culture etc. Mr Matti Sihvonen, Foex Indexes presented a topic on “Price indexes for industrial wood pellets and wood chips”. The participants found out that a reliable index is needed for: pricing supply contracts, hedging and for taxation value setting and investments. Energy companies hedge both their costs and revenues. According to the speaker, in order to meet the targets set in the national renewable energy action plans, Europe will need to significantly increase the imports. For example, if solid biomass used for heating increases from 40.1 to 58.6 Mtoe, Europe would need additional 80 million tons of wood chips or 40 million tons of wood pellets (if all of this would be in wood). If solid biomass in electricity generation increases from 12.7 GW to 218 GW, it would mean 100 million tons of additional wood chips or 50 million tons of wood pellets. Pellets will be the most traded biomass resource; however, this market is dominated by 5 major buyers in Europe whilst pellets producers are running only a part of their capacity. Governments do not see a big potential for biomass but solar and wind energy will be more costly for tax payers. The speaker informed the participants that the pellets index is divided into three areas: Pix pellet Nordic CIF index published since September 2009 (currently pellets index is at around 30 euros/MWh (or 144 euros/ton)), German and Austrian index to be published soon (Wood Pellet Austria index is published since January 2007) and the pellet index of Belgium, Netherlands and Great Britain. Indexes for residues (unofficial logging residues index is at 18-19 euros/MWh), pulpwood chips (15-25 euros/MWh) and global index are under development, however, global index will take time to be established. Martin Junginger from Utrecht University provided a speech on ” International trade of wood pellets – prices, trade flows and future trends”. Regarding biomass trade, wood chips, firewood, waste wood, wood briquettes, and agricultural residues including straw are traded in Europe under EUBIONET III project. However, the most tradable biomass 8

source is pellets. According to Martin Junginger from Utrecht University, European pellet consumption in 2009 reached 8.5 million tones and probably around 10 million in 2010. Pellet consumption is the highest in Sweden (1.8 million tons), Denmark, the Netherlands, Belgium, Germany and Italy (all roughly one million ton in 2009) and the US. Canada, USA and North-West Russia are the major exporters to Europe (especially to Sweden, the Netherlands and Belgium). Industrial wood pellet prices range between 110-140 euros/ton in the EU, and 80-110 euros/ton in North America. High quality pellets for residential heating between 150 - 250 euros/ton. The price of pellets depend on freight cost and US$/€ exchange rate. Currently, according to the speaker, international wood pellet trade is increasing within the EU and especially from outside the EU. Wood pellet demand is forecasted to grow rapidly in next 5 years: it could more than double and reach 24 Mtoe by 2015 (compared to 10 Mtoe in 2010), out of which 8 additional Mtoe would be used for electricity production and 6 Mtoe for the heat market. Nevertheless, such forecasted quantity largely depends on support policies (especially for electricity), oil price (especially for heat), logistics, and the possible introduction of sustainability criteria for solid biomass. Martti Savolainen from Vapo Oy focused on “Wood pellet production and markets in Baltic sea region”. Vapo is the largest producer of pellets in the Baltic Sea Region with a production capacity of over 800 000 tons of pellets. Vapo has production plants in Finland, Sweden, Estonia, Denmark and Poland. Biggest market in production and consumption is in Sweden. Consumption reaches 200 000 tons whilst the production is equal to 150 000 tons. The net exporters in the Baltic region are the Baltic States, Russia, Finland and net importers Denmark and Sweden. Poland produces slightly more than it consumes. The total production capacity in Baltic sea region is 4 million tons and consumption reaches 4.5 million tons. The most pellets sales are taking place during 4 winter months, thus the price varies according to the season. Logistics and ice play a remarkable role in availability of imported pellets and a consequent price. Regarding national renewable energy action plans, most countries assume they will have a sufficient amount of biomass sources, only Denmark counts on imports. The capacity growth is planned as follows: Sweden – 230 additional MW by 2020, Finland - 1 070, Denmark - 1 760 MW, Poland - 1 250 MW, Baltics – 250 MW.

4.3 Standards – Chair Martin Junginger, IEA Bioenergy Task 40 Eija Alakangas, a coordinator of EUBIONET III project presented the “Preliminary results of EUBIONET III industrial pellet questionnaire” analyzing whether an industrial pellet standard is needed and if so, what kind of properties should be included within such a standard. The preliminary survey also analysed whether the standard should include sustainability issues. European Commission gave a mandate to CEN 335 to work on solid biofuels standards. CEN has published standard EN 14961-1 for General use including also table for biomass pellets. EN 14961-2 for wood pellets for non-industrial use will soon be published.. EUBIONET III project’s role is to collect feedback from pellet market actors on solid biofuels/pellets standards and conclude whether an industrial standard on top of the existing one is needed. The views whether the industrial standard is needed were diverging. Those survey respondents who did not want to use CEN standard were explaining that the use of standard is related to additional cost, each contact has its own specifications and that the companies are not interested to have an industrial standard, especially if their clients are not asking for it. Those willing to have an industrial standard were claiming that this would ensure product quality and uniformity. 9

The users of pellets considered that the following properties would be important for industrial pellet quality: particle size distribution and ash melting temperature (for slagging). These two are important additional specifications for industrial pellets. Ash content, moisture content are important but especially net calorific value as the price depends on it. and chemical properties such as N,S, Cl were considered important, however, less for most of producers as they do not think that chemical properties (N, S, Cl) and heavy metals should be mandatory (normative), if pellets are produced from “clean” wood. The survey showed that some utilities saw it beneficial to have certification system for industrial pellets and maybe even including the sustainability issues. The survey also showed that a better definition for chemically treated material should be formulated as most of respondents were thinking that chemically treated wood is contaminated. Jean-Marc Jossart, on behalf of Yves Ryckmans from Laborelec, presented the utilities perspective on “Solid biomass specifications for large scale power plants”. All major utilities in Europe rely on supply contracts for pellets. In case one large power plant is unavailable for technical reasons or due to maintenance, a pellet trading among utilities becomes a necessity. Therefore, the largest Europe’s buyers came up with an “Initiative Wood Pellets Buyers (IWPB)” that aims to facilitate the trade between the utilities via uniform contracting. This initiative includes the common specifications of industrial pellets and common sustainability principles. Within this initiative, two wood pellets specifications has been proposed: one (high) suited to 100% biomass firing and a lower one suited for co-firing with coal. These proposed specifications are currently open for reactions by wood pellets suppliers and other stakeholders. According to a speaker, both specifications should be considered in developing standards for industrial wood pellets within CEN TC335 and ISO TC238. Further to that, the utilities are establishing common 8 sustainability principles, the most important of which are: GHG balance, carbon stock and biodiversity. Jean-Marc Jossart from AEBIOM/European Pellet Council presented the “ENplus wood pellet certification”. EN-plus certification scheme enables pellet producers to ensure international and uniform pellets quality levels by implementing the European standard EN 14961-2. This European standard cancels the national pellets standards and becomes a norm for all EU pellet producers during 2011. EN-plus certification ensures this standard with a few minor differences (higher quality) for pellet producers. EN-plus has three different pellet classes ENplus-A1, ENplus-A2 and EN-B. Pellets are allowed to be introduced in the market under the label ENplus, if the whole supply chain is part of the certification scheme. If a producer is interested to certify his pellets with EN-plus, he has to choose an inspection body listed on www.pelletcouncil.eu that inspects the plant and takes the analyses of the pellets plant. The auditor submits a report to a certification body that issues a certificate together with a licence to use the ENplus quality seal for a pellet plant. The certification scheme is organized by associations not a company. 13 national pellet associations and observers from outside Europe are involved in ENplus certification. The licence rights are owned by AEBIOM. The procedure goes through the national association or if there is no national association then it goes directly via European Pellet Council. 60% of German pellet production has been certified already. Austria, UK, have also started to certify their pellets with ENplus which will result in million of tons of certified pellets by the end of 2011 already.

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4.4 Sustainability of solid biomass – Chair Jean-Marc Jossart, AEBIOM Luc Pelkmans from VITO focussed on sustainability issues for solid and gaseous biomass If we look at greenhouse gas emissions in energy production (the life cycle analysis), it is not entirely a carbon neutral cycle. But the results are heavily influenced by: system boundaries, reference system, functional unit, allocation of byproducts, geographical distribution, time scale and (in)direct land use change. There are plenty of potential risks such as soil water, air, biodiversity and at different levels: international, national and company/farm level. Putting these sustainability rules in legislation is quite unique. However, due to the public concern, the EU puts it in practice using a pragmatic approach. The speaker reminded participants the current sustainability rules for biofuels and bioliquids established in the Renewable Energy Directive in 2009 as well as the EC report published in February 2010 on sustainability rules for solid and gaseous biomass. Luc Pelkmans introduced the participants the BioBench project, which is made for the European Commission. The aim of this project is to compare national rules and regulation related to (solid) biomass sustainability and to determine the impact of these rules on biomass availability and cost, with a view to determining whether there are impacts on biomass trade within the EU and to and from the EU. The partners of this project screened 27 member states on energy, environment and forestry related legislation. There are a number of rules at national level: on biomass production (i.e. short rotation), distinctions in forest regulations, regulation focused on end use. Some legislation promotes local biomass (from 50 km or so) or protects local economic sources. The EC is looking into it at the moment. Voluntary systems were not analysed, however, 67 voluntary systems were analysed by Jinke van Dam in 2010. Antti Asikainen from Finnish Forest Research Institute, spoke about the “Dimensions of sustainability in forest biomass supply”. She informed that the theoretical, terrestrial biomass potential is in range of 200 to 250 EJ, technical potential is around 100 EJ. Current use is about 40 with only 4 EJ from agricultural biomass. If we maximize the biomass resources, it would add 2-3% of RES globally. There is a clear gap between supply and demand in the EU by 2020 – supply 462.6 oven dry tons (odt) and demand 555.3 odt. This means there would be a gap of more than 100 million tons. This gap can be even bigger as the short rotation are not established properly yet. The use of forest chips grew rapidly; new figures indicate we have about 7 million solid1 m3 used. There is still much to do in order to reach the target. However, if we intend to increase biomass – it should not change the land use. When we talk about intensive biomass harvest, we talk about negative impacts. In Nordic conditions, round wood harvest does not reduce the growth of tress /forest in next 10 years. In northern part – it would even grow. Nutrient leakages decrease if logging is

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1 solid m3 is about 2.2 MWh or 7.9 GJ. 11

removed. The best results could be achieved if we leave stumps and take only residues. Phosphorus is the main problem. Regarding nitrogen levels, only 10% is accepted in the EU. We can compensate nutrient removals efficiency by controlling it. If the nitrogen is added, the growth impact is short. If we combine it with ashes, the effect lasts for 20 years. Root rot is the most severe disease which lowers timber quality. Removing stumps could help to prevent it, however, falling root pieces can still spread the disease to the new seedlings. Furthermore, removing logging residues is appreciated by berry pickers, hunters and others. There are lot of small forest holdings. The price of wood was higher in 2009 but this year the wood becomes attractive again due to the new policies. Regarding the carbon loss, when biomass start decomposing, the carbon releases very quickly – 80% carbon is released from stumps in 30 years. Forest is a very unsafe bank for carbon savings. Coal deposit is safer than the forest especially due to the forest fires. Josef Rathbauer from FJ-BLT, Austria presented a topic „Summary of EUBIONET III case studies and manufacturers of biomass heating and cooling – fuel switch from fossil to biomass” According to the speaker, these case studies aim at comparing the fossil fuel systems with biomass systems whilst providing the comparison of realistic market prices. For example, a comparison of heating oil, gas and pellets use for single family house in Germany. Investment cost is the highest for pellets (almost €10 0000 EUR) while for heating oil is only 5 350 and gas – 8 250 Euros. Operational cost is also the highest for pellets but because of the low price of pellets, the annual cost for these three sources is more or less the same: 152 Euros/MWh for heating oil, 149.9 Euros/MWh for gas and 150.2 Euros/MWh for pellets. The pellets price remain more or less the same in few cases, however, in various cases the price of heating oil and gas might vary greatly. In 2009 – the heating oil price was lower that is why the use of heating oil was not a big difference. However, according to GEMIS model calculation, by using pellets (0,4 tonCO2 equivalent), we reduce GHG emissions by 11 time (compared to heating oil) and The GHG emissions, and by 9 times (compared to gas). In Sweden, however, because of the CO2 taxation, heating oil cost much more than pellets. 32 case studies carried out within the EUBIONET III project gave a good overview. Specific cost of biomass is lower than fossil fuels and CO2 emissions are reduced in a range of 200 – 1 000 kg CO2/ MWh.

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5 Workshop Programme – Bioenergy and Forest industry

Friday, 15 April 2011, VTT, Vuorimiehentie 5, Espoo, Finland Biomass availability for energy and raw material – Chair Timo Heikka, StoraEnso Opening of the workshop, Kai Sipilä, VTT Biomass and bioenergy solutions for pulp & paper industry, Ulrich Leberle, CEPI, Belgium Real potential for changes in growth and use of EU forest, Udo Mantau, University of Hamburg, Germany EUBIONET III - Agroindustry biomass residues for pellet raw material, Jørgen Hinge, Danish Technical Institute, Denmark Biomass and bioenergy solutions for forest industry - Chair Stefan Sundman, Finnish Forest Industries Federation Bioenergy solutions for forest industry, Stefan Sundman, Finnish Forest Industries Federation, Finland Sustainability of forest biomass, Pekka Kauppi, University of Helsinki Pellet production and trade in Russia – role of forest industry, Olga Rakitova, Bioenergy International, Russia Pellets and torrefied biomass – Chair Eija Alakangas, VTT/EUBIONET III Stora Enso approach to pellet business, Matti Mikkola, StoraEnso, Finland Torrefaction of biomass, Jaap Kiel, ECN, the Netherlands Metso concept for torrefaction, Peter Björklund, Metso Power AB, Sweden Future options for bioenergy in forest industry Darkness at noon? Scenarios for bioenergy, Petri Vasara, Pöyry, Finland Discussion and conclusions of the workshop Presentations are available on EUBIONET III website at www.eubionet.net

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6 Bioenergy and forest industry

6.1 Biomass availability for energy and raw material – Chair Timo Heikka, StoraEnso Opening of the workshop, Kai Sipilä, VTT Forest industry is a major bioenergy producer today with woody bioenergy being a dominant source of bioenergy in Europe. However, the global bioenergy trade by 2020 will face both threats and opportunities for the forest sector. In the EU there are more than 950 pulp and paper mills which is an attractive site to increase bioenergy business. Forestry industry is not a new industry with well-established logistics and technologies. The policies promoting the heat and power production in this sector will further boost the market. VTT made an analysis on potential of various biomass technologies. In this study the total business potential of liquid biofuels in European pulp and paper industry with selected bioenergy technologies has a revenue potential up to 2 500 - 5 000 MEUR/a and an investment potential up to 11 000 - 16 000 million EUR by year 2020. Regarding the forest resources, an increasing biomass harvesting potential is located in Eastern Europe, Russia and South America and some African countries whilst Western Europe has a stable harvest potential but in high demand. Furthermore, in the future, the biofuels production will be integrated to forest industry operations, increasing the revenue on top of CHP production and mills will be retrofitted into biorefineries. Biomass and bioenergy solutions for pulp & paper industry, Ulrich Leberle, CEPI, Belgium Mr Leberle reminded that biomass represents more than 50% of the RES target. Biomass will cover 80% of renewable heating and cooling (90 Mtoe), 20% of renewable electricity (20 Mtoe) and 95% of renewable transport (29 Mtoe). Solid biomass (almost all wood) represents 72 Mtoe in heating and cooling sector, 14 Mtoe in electricity. 14

According to the plans, 333 million solid m³ wood supply is necessary. If, according to the data given by member states, this solid biomass based energy would have to be delivered by European supply, it would have to be consumed at 85% efficiency. Therefore, according to the speaker, the European Commission should verify if these plans are feasible and whether the conversion factors and measurement units used are appropriate. In order to reach such a supply, mobilisation measures should be put in place and the potential from agriculture and forestry used via Common Agriculute Policy (CAP) review. Also, there is a need for proportionate binding and harmonised sustainability criteria for solid biomass, based on existing work (Forest Europe for SFM), that would include the conversion efficiency. The speaker highlighted that the forest area of Europe grows by 4 363 football pitches per day which is 6 450 square km per annum. The speaker also showed that pulp and paper industry represents 25% of total European solid biomass based energy consumption and 5% of total European renewable energy consumption. The innovation in pulp and paper instry lies two paths: in better energy and resource efficiency, recycling etc as well as the production of new products and production of multiple products (biorefinery principle), i.e: bioenergy and biofuels (ethanol, synthetic gas, etc.), construction material (lignin), chemicals (varnishes, acetone, etc.), textile fibre (rayonne, viscose, etc.), food ingredients/additives (xylitol, vanilin, sorbitol, etc.), bio-polymers (PHB for biodegradable plastics, etc.) Real potential for changes in growth and use of EU forest, Udo Mantau, University of Hamburg, Germany Wood market today is roughly structured in four sectors: forestry, other woody biomass, material uses (forest industry) and energy use. Forests represent 1 billion solid m³ resources and 800 million solid m³ actual consumption. 69% of woody biomass comes from forests and 31% from other sources. 57% of woody biomass is actually consumed in material uses and 43% in energy uses. Short rotation plantation are available currently only on about 30 000 ha. The future development varies enormously. Therefore, this sector was not quantified in the EU wood project. It is seen as part of the solution for future needs. The overall contribution of all by-products (sawmill by-products, other industrial wood residues and black liquor) from wood industry and material uses is 17.8%. Industrial wood residues are the most important drivers of cascade uses. They grow with wood industry growth and they are partly a further processed resource. The overall woody biomass, including solid wood fuels adds up to one billion m³. This corresponds to theoretical reserve of about 170 million solid m³ compared to the demand side. However, one should bear in mind that this is a potential amount, which will only be a market relevant volume only if the mobilisation of the assumed amount is successful. To satisfy the demand for wood, forests will play the central role. Based on detailed forest inventory data, a maximum harvest potential was estimated using the large-scale EFISCEN model. This potential was reduced taking into account multiple environmental, technical, and social constraints that limit the amount of wood that can be extracted from forests. This was done for three mobilisation scenarios, which differed in environmental concern and the effective implementation of existing recommendations on wood mobilisation. It was estimated that the realistic potential for 2010 is 686 million m³ solid wood and could range between 581 million m³ and 839 million m³ in 2030 depending on the mobilisation scenario.

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EUwood study made the following conclusions: 

The total demand for woody biomass is estimated to increase from almost 800 M m³ (A1) to nearly 1,400 M m³ in the A1 scenario and about 100 M m³ less in the B2 scenario.

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The study makes clear that the demand scenarios do not differ a lot, even though the average growth in A1 with about +2.5% growth is significantly stronger than the growth in scenario B2 with 1%. Surely, this is due to the fact that the consumption of energy wood does not depend on the scenarios but is influenced by the energy political objectives.

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In the medium mobilisation scenario, which corresponds largely to the current forest management system, the demand will exceed the potential between 2015 and 2020. However, this is only valid in case the possible ecological and technical potential is, in fact, mobilised. Yet, this requires great political and economic efforts.

EUBIONET III - Agroindustry biomass residues for pellet raw material, Jørgen Hinge, Danish Technical Institute, Denmark Mr Hinge focussed on new and unexploited biomass resources presenting the results of EUBIONET III research. There is a high potential in the new materials such as tobacco waste, algae, potale pellets, cottage cheese whey, residues from chocolate production, rape cake, dried destillers grain, viniculture residues, animal manure, almond shells, olive oil pomace etc. In total, there are 54 ”new” biomass products representing: • • •

Actual amount: 5.9 mill tons dry matter (80-100 PJ) Estimated potential: 18-22 million tonnes (270-330 PJ) - preliminary estimates 100.000 tons dry matter/1million inhabitants (?) – It would mean 50 million tonnes/year in the EU (750 PJ ); excluding manure, aquatic biomass, wood and straw

The largest biomass potentials lie in residues from olive oil production with 1,8 mill t/year ~ 31 PJ/year (theoretical!!!); grain screenings with 2.5 mill t/year ~ 40 PJ/year (theoretical!!!) and solid fractions from animal manure with EU theoretical potential of 730 PJ and aquatic biomass. However, it is rather challenging to use these fuels for bioenergy production due to uneasy fuel characteristics such as: high moisture content, high ash content, chemical composition, utilization of ash and other residues. There are also a number of non-technical challenges such as competition with other products such as fiber, feed; legislative barriers and sustainability issues. It is also important to choose the most appropriate technology: combustion, thermal gasification, biogas, fermentation.

6.2 Biomass and bioenergy solutions for forest industry - Chair Stefan Sundman, Finnish Forest Industries Federation Bioenergy solutions for forest industry, Stefan Sundman, Finnish Forest Industries Federation, Finland In Finland, over 1 billion euros were invested to bioenergy in 2000’s. Bioenergy represents 70% share within all renewables in Finland. Fossil CO2 emissions have decreased by 47% per produced ton since 1990. Forest industry is responsible only for 7% of CO2 emissions in Finland. 

Forest can produce different products and bioenergy on top of it. The forest industry’s new, bio-based business activities will be built on products for which

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there are significant size markets. The principle is to get the most out of possible resources. The forest companies are looking into biorefineries business. In the future, biofuels to liquid will be an additional input. They forest sector players see many opportunities; however, the availability of energy supply is uncertain. We have enough sustainable growth, one challenge, however, is to increase the supply not only in Finland but also in EU. We need to mobilise the forest owners and keep them mobilised.

Sustainability of forest biomass, Pekka Kauppi, University of Helsinki Renewable resources, according to the speaker, might fail and become unsustainable. We need good practices to ensure the sustainability of renewable sources. Forest sector, however, prevailed until now. Forest can be a carbon source, a neutral forest or a forest as a carbon sink. One of sustainability rules is: we should not cut more than the forest grows. Nevertheless, as it can be seen from Finnish Forest Research Institute (Metla) research, bioenergy procurement from Finnish forest has increased, yet the carbon sequestration has also increased. This means that Finish forests grow and there is no explanation why. Nevertheless, we should be careful with it anyways. Pellet production and trade in Russia – role of forest industry, Olga Rakitova, Bioenergy International, Russia Ms Rakitova started the presentation informing the audience about the biggest pellet mill in Europe that started operating this spring in Russia – Vyborgskaya Cellulose. The capacity of the mill is 1 million tons/year. 100 million US dollars were invested in this mill. In 2012 1 million tons will be produced in this plant for European markets. Thanks to this pellet plant, Russia can become the biggest pellet producer in Europe. However, only 20% of Russian pellet production is used in Russia. Total installed pellet production capacity reaches 3 million tons but the actual production is 1 million tons made from wood and sunflower husks. In total, there are about 200 pellet production plants in Russia. Two big Russian pellet producers have about one third or even half of wood pellet export from Russia to Europe. These companies are “DOK ENISEY” from Krasnoyarsk region (Siberia) and “LESOZAVOD25” from Archangelsk region (North-West of Russia). Each of these companies exports about 120 000 – 130 000 tons of pellets per year. The third Russian operative big pellet mill is “STOD” (“Tallion-Terra”) from Tver region has a production capacity of about 80 000 tons per year of wood pellets. The European companies such as Electrabel, Fortum and Dong use Russian pellets. Russia exports about 300 000 sunflower husk pellets mainly to Great Britain and Poland. The main producers of fuel husk pellets are “Ug Rusi” from Rostov-on-Done exporting 130 000 tons of husk pellets, “EFKO” from Belgorod region, “Yantarnoye” from Saratov region, “Chishminskoye” from Bashkortostan, “Pavlovsk-agroproduct” as well as “Bunge SNG” and “Centre Soya” export fuel pellets to Europe. Russia, however, has the largest natural gas resources in the world, the second largest coal production, the third largest oil production. Therefore, even though Russia also have 23% of the world forest resources, only ¼ of needed volume is harvested and there is plenty of abandoned agricultural lands.

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6.3 Pellets and torrefied biomass – Chair Eija Alakangas, VTT/EUBIONET III Stora Enso approach to pellet business, Matti Mikkola, StoraEnso, Finland Amongst paper, packaging, Stora Enso produces wood products. The company has 24 mills and one of them - the biggest sawmill in Europe. According to Mr Mikkola, pellets is a natural business expansion/value added for sawmills. There are cost advantages to combine these industries. They can use chain of custody and trace 100% of their products. In this way, in 2 years StoraEnso developed the capacity from 0 to 250 000 tons. StoraEnso focuses on all size markets and thanks to the WebShop online purchasing solution, the company received 30 000 orders from residential market. •

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Europe will remain a net pellet importer as European pellet producers focus on residential demand and have a limited high quality raw material and eastern Europe will continue export to western part. The speaker presented the following facts about the pellets market: • With ~800 production sites globally the wood pellet industry remains fragmented • 15 pellet producers account for 50% of the global production capacity – 2/3 of the top producers are based in Europe – North America is expected to grow • Five companies produce 60-70% of the Northern European pellets (SCA BioNorr, Vapo, Lantmannens, Stora Enso, Grannul Invest), however, many of the top producers have problems with raw material procurement (volume and price)

According to the speaker, Russia and Baltics are competitive in pellets market. Energy in Russia cost less than raw material in other countries but logistics in Russia are a key issue. Raw material cost in Baltics is 30% less. Baltics is well positioned but everybody is interested. In Finland, it all depends on development. In Sweden – market and logistics is an advantage. Torrefaction of biomass, Jaap Kiel, ECN, the Netherlands Mr Jaap Kiel talked about the status of torrefed pellets. He addressed technological issue but did not focus on price. Biomass is a difficult source due to logistics. Torrefaction is a treatment of biomass in mild temperature 200-300 degrees for 10-30 minutes in the absence of oxygen. Material becomes friable and homophobic and fibrous. It has superior properties in transport handling and storage – does not attract water as normal pellets. However, this technology has a number of technological challenges. The speaker made the following conclusions: 

Torrefaction potentially allows cost-effective production of 2nd generation biomass pellets from a wide range of biomass/waste feedstock with a high energy efficiency (>90%)

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Torrefaction should be considered as a separate thermal regime and requires dedicated reactor/process design

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Torrefaction development is in the pilot/demo-phase, with >10 demo initiatives underway in Europe; strong market pull for torrefaction plants and torrefaction pellets

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For ECN’s BO2-technology, demo-plant in preparation and industrial partnership for world-wide market introduction nearly established

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Main characteristics of torrefaction are known and some quantitative relations have been determined between torrefaction conditions and product properties, but ....

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Performance testing still is in an early phase, which holds even more for iterative optimisation of production recipes for torrefied biomass pellets

Metso concept for torrefaction, Peter Björklund, Metso Power AB, Sweden Biomass will grow by 2300, therefore, large biomass amounts will have to be transported. In future, there will be a need to have a complete control over biofuel chain which implies that biomass sources will go towards pelletising, gasification, pyrolysis processes. It is a great opportunity. Torrefaction is a part of this future strategy. Metso uses 800 million tons of coal that could be reaplaced. Torrefied product could go to utilities as it is convenient. It is also suitable for the residential uses as well. What is necessary to ensure availability, ability to handle a and raw materials) as well as perspective, there is a need to ensure a good quality.

is a good process: ability to secure a high operation wide selection of raw materials (handling cheap residues ability to secure uniform product quality. From economic ensure a high yield with low operation costs as well as to

Minimising a fire risk and low emissions is important. Metso has a know-how of different torrefaction technologies. They applied a cascading reactor. This system has lower investment cost than a normal one. Indirect heated kilns and dryers can be applicable. Moisture content 35 to 45%. The speaker informed that a 30 000 tons/a industrial development plant for torrefaction is scheduled to be commissioned 2012. The investors are the municipal heat & power companies Övik Energi, Umeå Energi, BioEndev together with industrial partners. The continuously operated plant will produce black chips which are sold to cover the operational costs of the plant and continued r&d on torrefaction.

6.4 Future options for bioenergy in forest industry Darkness at noon? Scenarios for bioenergy, Petri Vasara, Pöyry, Finland The speaker showed different models on bioenergy development and explained in detail Pöyry model.

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7 Appendix 1: Summary of the feedback of the event

15 participants filled in feedback questionnaire (mainly on 14 and only few on 15 April 2011)

Organisation type of respondent: Industry  Forest industry  Metal industry  Chemical industry Other industry, trading house Association Ministry and other public organisation Other public Research and university NGO

3 1  1 3 2 4 1

Evaluation (scores 1–5, 1 = unsatisfactory, 5 =very good) Average scores Programme Workshop place Speakers General arrangements

4.6 3.9 4.5 4.5

What was the most interesting lecture or topic?       

Bioenergy in Finnish energy system / Petteri Kuuva x 2 Price indexes for industrial wood pellets and wood chips / Matti Sihvonen x 5 Trading of wood chips in the Baltic Sea Region x 1 International trade of wood pellets / Martin Junginger x 2 Torrefaction of Biomass / Jaap Kiel x 1 Sustainability of forest biomass / Pekka Kauppi x 1 Stora Enso approach to pellet business / Matti Mikkola x 1

Of which topic you would like to have more information?       

Price indexes for industrial wood pellets and wood chips I will go through the presentations on the USB-stick Trade, flow, index Price collection and price mechanisms Perhaps a presentation from a laser Finnish consume of solid biomass It is difficult to choose the only one… Price indexes 20

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Dimensions of sustainability in forest biomass supply Torrefaction

Other comments and feedback           

Perfect presentations I would prefer to get presentations hand-outs before the beginning of workshop. So I can make notes The program was very interesting as it is Would be nice to have hand-outs The should be coffee after lunch I missed that the place was VTT and not the hotel. My fault. Otherwise a very good seminar Very good arrangement Presentations on project website Next time please hand-outs Good presentations in genera Presentations on website

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